This sovereign rating is issued by The
Economist Intelligence Unit credit rating agency, registered in accordance with
Regulation (EC) No 1060/2009 of 16 September 2009, on credit rating agencies, as
amended, and is issued pursuant to such regulation.

The sovereign risk rating is unchanged at AA, although the score has deteriorated by 1 point, to 17. The tax cuts passed in December 2017 are eroding the government's revenue base, and higher spending caps will enable hundreds of billions of dollars of new spending. Consequently, The Economist Intelligence Unit expects the federal debt to rise from an estimated 77.8% of GDP in 2018 to 84.7% of GDP by end-2020, which would be the highest level since the 1940s.

Currency risk

The currency risk rating remains at A. In late 2018 and 2019 we expect the dollar to be supported by strong economic fundamentals and continued monetary policy tightening. However, the currency remains vulnerable to a number of risks, such as disappointing domestic economic growth and possible shocks emanating from erratic policymaking.

Banking sector risk

The banking sector risk rating remains at A. US lenders performed well in the June 2018 government-mandated stress tests, and the non-performing loan ratio continues its cyclical decline as the economy continues to strengthen. However, the president, Donald Trump, is inclined to water down or remove many regulations governing the banking sector, which would boost profits but also be likely to weaken lending standards.

Political risk

Political risk remains at A, but the score has deteriorated by one point, reflecting the highly partisan atmosphere and the approaching mid-term elections in November. Although Congress has passed tax cuts and raised spending limits, we do not expect other major legislation in 2019-20, as partisan tension remains high.

Economic structure risk

Economic structure risk remains at A. Greater energy self-sufficiency, owing to higher shale gas and oil production, has reduced import requirements, narrowing the current-account deficit. However, public debt has more than doubled as a share of GDP in the past decade and will rise further in the coming years, owing to weaker state revenue collection and higher spending.